Greece: political meltdown will cut off green shoots of growth

Greece's Democratic Left party says it is pulling out of the coalition government amid a row over the closure of national broadcaster ERT. Sotirios Paroutis, Warwick Business School, gives his analysis:

Greece desperately needs its coalition Government to stay together during this crisis, a political meltdown could cut off the green shoots that were starting to emerge in Greece.

But the shutdown of the Hellenic Broadcasting Corporation (ERT) by the Greek government has sparked strong reactions and a political crisis, with the Democratic Left party eventually withdrawing its support from the government.

What a difference a day makes. On Wednesday night, the indicators were that the three political leaders whose parties comprise the Greek government were close to an agreement with all of them agreeing that ERT needed to reform. Twenty-four hours later one of the parties withdraws its support from the Greek government - yet with all parties still agreeing on ERT’s reform. So while the principal target was common (reforming ERT), disagreement over the way the new national broadcaster would emerge caused the crisis. Of course, politics is not as straightforward as management – we don’t expect it to be – yet managing change in public organisations is not an area where politics is known to excel.

Before the crisis, in 2009, ERT had 4,553 staff and until a few days ago there were 2,907 ERT employees. It cost about 300 million euros (£256 million) a year to run and was primarily funded by a monthly fee added to the electricity bill of each Greek household. Despite efforts in the past few years to restructure the corporation and redesign its business model, no significant change of strategic direction has taken place, with employees strongly resisting and often going on strike over any restructuring efforts. Critics of ERT’s business model point to a slow-to-adapt organisation where political parties were able to satisfy their electorate by offering them employment. Also, they argue that ERT did not change its internal processes, as other private media have done, resulting in over-staffing in areas that are no longer in demand, while having to rely on outside suppliers for new services.

Beyond ERT, the Greek government, in order to secure its next trance of funding from its creditors, the troika, has committed to dismissing 15,000 public servants by the end of 2014 (of which it needs to shed 2,000 by the end of July and 4,000 by the end of 2013).

Greek officials have confirmed that the troika asked them for “game-changing” reforms in the public sector. One of these measures is about changing the perceptions that a public sector job is ‘for-life’ by actively reducing the public sector work force. Yet, the 2,907 ERT employees represent only a very small proportion of the 650,000-strong public work force and ERT was actually profitable in recent years. It now appears that this decision was aimed at signalling further future radical reforms across the Greek public sector.

Radical reforms, though, are increasingly challenging to implement in austerity-hit countries. With unemployment levels at high levels, the issue is not so much about political instability but also for maintaining an acceptable level of societal well-being. Going forward, two key dimensions will be increasingly important for Greece: the pain associated with the reforms needs to be shared in a fair and just way, an issue of paramount importance for societal coherence, and there should be more concentrated efforts to foster and grow the ‘green shoots’ in particular industries – these ‘green shoots’ will actually help reduce unemployment - and Greece to revive its economy.